Medicare overbilling case against Prime Healthcare now involves DOJ

The U.S. Department of Justice (DOJ) has joined a five-year-old whistleblower lawsuit against Ontario, Calif.-based Prime Healthcare Services, alleging the hospital chain pressured physicians to unnecessarily admit patients.

The Los Angeles Times reported the DOJ’s request to join the case was granted May 24, after it said in a court filing it had found evidence that Prime’s hospitals “submitted or caused the submission of claims to Medicare for unnecessary inpatient stays.” 

Its investigation supposedly found multiple accounts of Prime CEO Prem Reddy, MD, of telling emergency department physicians to “to find a way to admit all patients over 65 because they all have insurance,” giving extra work to physicians with higher readmission rates and threatening to fire physicians who didn’t find ways to “cause the admission of Medicare beneficiaries.”

The lawsuit was first filed in 2011 by Karin Berntsen, director of quality and risk management at Alvarado Hospital in San Diego. She accused Prime executives of eliminating observation stays and refusing to release patients to post-acute care centers in an attempt to be able to charge Medicare for additional services and increase readmissions.

Berntsen’s lawsuit estimated Prime overbilled Medicare for $50 million because of these practices. LA Times said Prime called the allegations “speculative nonsense” when the complaint was unsealed in 2013 and continues to deny them now.

“The allegations under investigation arise from complex regulation and a lack of clarity between what federal regulators and physicians believe necessary to adequately document medical necessity for hospital admission,” Troy Schell, general counsel for Prime, told the Wall Street Journal.

The company’s 14 California hospitals are named as co-defendants in the suit. Prime owns a total of 43 facilities across 14 states.

The DOJ was given 30 days to file its own complaint in the case, and legal experts told the LA Times that the federal involvement is significant, given the DOJ’s focus on False Claims Act cases in recent years.

“It is actually quite significant when the government decides to intervene in one of these cases. The government brings to bear significant investigatory resources and leverage,” said Washington attorney and False Claims Act expert Kathleen Clark. “Intervention is seen not as a guarantee of a win, but it’s a very good sign for the whistle-blower and [his or her] lawyers.”

POLITICO said DOJ was recovered more than $17.5 billion in damages from cases involving fraud in federal healthcare program since 2009.